Economics unit 3 key terms

Created by

Hadiya

Subdecks (1)

Economics unit 3
Economics unit 3 key terms
9 cards

Cards (111)

Dividends 
A share of profit of a company that is distributed to its shareholders according to the number of shares held by them.
Join ventures 
A separate business entity created by 2(+) parties. It involves sharing ownership, returns and risks of the new project.
Limited company 
A type of business when owners are shareholders.
Offers limited liability to shareholders as the company and its owners are legally separate.
Not-for-profit organisations 
Organisations that don't have a profit goal but may use any profit or surplus to support their aims.
Private sector organisations  
Owned by individuals or companies, not the state.
Shareholder 
A person or company that owns 1(+) shares in a limited company.
Sole trader 
A business owned and controlled by 1 person.
State-owned enterprises  
Large organisations created by the government to carry out commercial activities.
Unlimited liability  
Owners of the business are personally liable for its debts and may have to sell personal assets to pay for them.
Backward vertical integration 
Joining together of 2(+) firms into 1 firm. The purchaser merges with 1(+) of its suppliers.
Conglomerate integration 
When 2(+) firms join into one to produce unrelated products.
Demerger 
When a firm splits into 2(+) independent business.
Forward vertical integration  
2(+) firms join into 1. The supplier merges with 1(+) of its buyers.
Horizontal integration 
2(+) firms in the sa industry join at the same stage of production.
Merger/takeover 
2(+) firms join under common ownership.
Niche market 
Product / service that doesn't have many buyers, but that allows the firm to make better profits.
Organic growth  
Firms increasing size through investment in capital equipment/ an increased labour force.
Vertical integration  
2(+) join into 1 at different stages of production in the same industry.
Cost-plus pricing 
When firms fix a price for products by adding a fixed percentage profit margin to the long-run average cost of production.
Divorce of ownership from control  
When managers and directors of a business are a different group of people from the owners of the business.
Profit maximisation  
Occurs when difference between total revenue and total cost is greatest.
Proft satisficing  
Sacrificing profit to satisfy as many key stakeholders as possible e.g. consumers,
Revenue maximisation 
When total Revenue is highest and MR=0.
Sales volume maximisation  
When volume of sales is greatest. AC=AR Firms can price limit at this point of break even to limit competition. Firms can flood the market at this point to gain recognition for their products.
Average revenue  
Average amount received per unit sold.
TR ÷ Q sold.
Marginal revenue  
Addition of total revenue from the sale of an extra unit.
Total revenue 
Total money received from the sale of any given quantity of output.
Average cost 
Average cost of production per unit
Total cost ÷ Q produced = AVC + AFC.
Average fixed cost 
TFC ÷ number of units produced.
Average product 
Quantity of output per unit of factor input.
Total product ÷ level of output.
Average variable cost 
TVC ÷ number of units produced.
Economic cost 
Opportunity cost of an input to the production process e.g. an investment.
Factors of production  
Land
Labour
Enterprise
Entrepreneurship
Capital
Fixed costs 
Don't vary as level of production increases/decreases.
Law of diminishing returns
When increasing variable inputs with fixed inputs results in a decline in the average product.
Long run 
Period of time where all factor inputs can be varied, but the state of technology remains constant.
Marginal cost  
The cost of producing an extra unit of output.
Short run 
Period of time when at least one factor input to the production process is fixed.
Total cost 
The cost of producing any given level of output.
TVC + TFC.
Very long run 
Period of time when the state of technology may change.